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Financial regulators in many Asia Pacific countries have already begun their digital banking – also known as neo, virtual, and challenger banking – licence journeys. Australia, Hong Kong, China, India, Japan, South Korea and Taiwan have framed their own virtual banking regulations and issued digital banking licenses. The Monetary Authority of Singapore (MAS) is reviewing applications, while Malaysia and Thailand are at the inception stage of drafting their digital banking frameworks.

However, the COVID-19 pandemic has inevitably resulted in economic instability and has also affected the deployment of virtual banking. While it is unclear how long the pandemic will last, regulators seek to prevent another systemic risk buildup similar to the global financial crisis of 2008.

Digital banking has taken relative importance amid social distancing measures. The use of online and mobile banking has increased and challenges from fintechs and bigtechs have emerged, prompting various lenders to enhance their digital offerings. These circumstances have made it necessary to review the current status of digital banking licences in Hong Kong, Singapore and Malaysia.

Hong Kong

The Hong Kong Monetary Authority (HKMA) has issued eight virtual bank licences since March 2019 to various local banks, fintech, insurance companies and bigtech companies. The launch of virtual banks is said to be one of the key components of HKMA’s Smart Banking initiatives.

These virtual banks are expected to open within the next six to nine months, but the pandemic has affected such plans. Some of the approved virtual banks have failed to launch within the indicated time period.

Only ZA Bank has officially begun operations...

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